Sole Trader to Partnership

Farmerswife

Hi I'm new to this so please be gentle!
I have a farming client that is currently a sole trader but wishes to form a partnership with his son. He doesn't want the land and buildings to be transferred legally into the partnership name he wants them to remain in his name. I'm confused as to what goes onto the partnership balance sheet. Are there any capital gains tax/IHT issues I should be wary off? Many Thanks

sdv

Farmerswife wrote: »

.....doesn't want the land and buildings to be transferred legally into the partnership name he wants them to remain in his name.
.............Are there any capital gains tax/IHT issues I should be wary off? Many Thanks

Leave the Land and building in the father's name. He does not have to bring in that asset into the partnership.

The partnership can then rent the land and the building from the father.

when the father fill in his tax returns he will have income from the partnership and rent for his land and building.

By having this arrangment the father will avoid any capital gains tax/IHT issues.

A note of caution. Father will be equally and jointly liable in law for any/all actions of his son. Should the son put the partneship in an insolvancy position, then the creditors are more likey to sue the father to recover their debt.

Farmerswife

I had thought of the partnership renting the land and buildings from the father but this will then be classed as rental income for the father and not a staight agricultural business so won't get 100% IHT relief on them when he dies? Sorry CGT & IHT are not my area!

Hasan.Ahmet

Partnership agreement.

Simple answer is a partnership agreement.
You can certainly offer information guidance advise but obviously
and ultimately what goes into that agreement is what the partners agree.

Farmerswife

They don't have a partnership agreement and are looking to the most tax efficient way of setting up the partnership.

Hasan.Ahmet

How/why have you/they determined in the circumstances partnership is the most appropriate entity for tax efficiency?

Farmerswife

Low profits as it's an asset rich business. They don't want the 'red tape' that goes with company law ie annual return, filing accounts, difficulties withdrawing money from the business, increased accountants costs. APR/IHT & CGT implications